Welfare reform: The implications of uncertainty

Share this story

Welfare reform: The implications of uncertainty

Tsunami? Hurricane? Firestorm? Whatever metaphor you choose to describe the raft of welfare reforms due in 2013, major impacts on landlords are unavoidable. In the first in a series of exclusive features for 24housing magazine, Jules Birch examines some of the uncertainties surrounding government policy.

We know what will happen when a series of cuts in individual benefits in April are followed by the start of the switch to Universal Credit in October. In most cases we also know how many people the Department for Work and Pensions (DWP) thinks will be affected and how much they will lose. But that is where the uncertainties begin.

Each of 2013’s changes would be hard enough to deal with on its own but the combined impact is much more unpredictable and compounded by four key factors.

First, estimates are only estimates. In the case of the benefit cap local authorities report some cases where families who will be exempt have been told they will be capped and others where families who will be capped have not yet been informed.

Second, we can’t predict how behaviour will change. How many tenants affected by the bedroom tax will be able to downsize or take in lodgers to mitigate their losses? How many people affected by the benefit cap will be able to get enough part-time working hours to qualify for working tax credit and evade the cap? What policies will landlords apply on rent arrears and possession actions – and how will the courts react? The DWP is commissioning independent monitoring and evaluation of the size criteria for two years from April 2013.

Third, the impact of the cap, in particular on temporary accommodation and supported housing, remains unclear. The Government has signalled that management costs will be stripped out before the cap is applied but rents will still be high. The DWP says it has increased the discretionary housing payment budget to £75 million in 2013/14 for people affected by the cap. The Autumn Statement said that housing payments to tenants in supported exempt accommodation will be exempted from the cap but clawed back £30 million in discretionary housing payments to pay for it.

Fourth, the sheer scale of the reforms means that tenants and landlords must take account of all of them, not just those that directly affect housing costs. Below inflation increases in benefits, cuts in council tax benefit, changes in disability living allowance, cuts in the social fund, new conditionality penalties for job seeker’s allowance and increases in the number of working hours needed to qualify for tax credits will all impact on tenants’ overall income.

That fourth factor will become even more important once Universal Credit starts in earnest from October. Once all benefits are paid in one monthly payment and housing costs are paid to the tenant rather than the landlord, any cut in income could have a direct impact on the tenant’s ability to pay the rent.

There are few precedents for such a huge reform. When housing benefit began 30 years ago it was introduced everywhere at once and poor planning and inaccurate forecasts of the number of claimants led to serious backlogs and delays. So there is some consolation to be drawn from the fact that Universal Credit is being phased in starting with new claimants.

Work also continues on six direct payment pilot projects. Interim findings will be published in the Spring and so lessons can potentially be learned in time to affect implementation. However, the pilots are only able to look at direct payment of housing benefit within the current system rather than under the changed conditions of the Universal Credit.

The DWP has tightly controlled information from the pilots but details that have leaked out so far suggest that 20 to 30 percent of tenants will struggle to pay their rent and that arrears have doubled in some cases despite intense support offered to tenants.

This article appears in the January edition of 24housing magazine. Click here to read in full.